By Andreas Rinke and Tim Hepher
BERLIN/PARIS, June 8 (Reuters) - The leaders of Germany and France have agreed to scrap a landmark project to develop and build a new-generation fighter jet, officials said on Monday, bowing to industrial rivalries over Europe's most ambitious defence programme.
German Chancellor Friedrich Merz and French President Emmanuel Macron discussed the troubled project on the sidelines of the EU-Western Balkans summit in Montenegro last week and concluded that there was no prospect of breaking months of deadlock between arms firms involved in the plan, German officials said.
Merz has therefore advised Macron not to pursue the construction of a joint fighter aircraft any further, they said.
Macron's office said the two had discussed the project at length and regretted that the main industry partners, European aerospace group Airbus, which represents Germany and Spain, and France's Dassault Aviation, had not been able to reach an agreement.
The decision to end the core pillar of Europe's largest defence project comes at a time when Western military officials have warned of a growing threat from Russia and the U.S. is stepping up pressure for Europe to re-arm itself.
Macron launched the project with former German Chancellor Angela Merkel in 2017 and has defended it for months. His office said France considered Franco-German defence cooperation remained a necessity for both countries and their European partners.
However the failure to reach an agreement on the €100-billion ($116 billion) project, which also includes Spain, underscores the struggles Europe has faced in rebuilding its military capacity after decades of underinvestment.
"It's hardly ideal signalling either to Washington or to Moscow," said Douglas Barrie, senior fellow for military aerospace at think tank IISS.
FACE-SAVING SOLUTION
The project, which centres on a core fighter jet supported by drones and linked by a classified "combat cloud," had been in doubt for months as the two sides have wrangled over specifications and control.
A European source briefed on the matter said the two sides were moving towards a face-saving solution in which the systems outside the core fighter, such as the "combat cloud" of highly secure links, would continue to be developed under the same name: Future Combat Air System or FCAS.
The compromise is mainly symbolic since FCAS is a generic name for such systems and not unique to this plan, but officials have been seeking a formula allowing Macron to relinquish the core fighter without having to declare the whole project dead.
Macron and Merz had tried for months to salvage the project and overcome differences between Airbus and Dassault.
There was no immediate comment from the companies but Germany's IG Metall union said it welcomed the decision to end the project, saying it had been clear for months that Dassault and Airbus would not be able to cooperate on an equal footing.
"I would like to thank Friedrich Merz for this difficult but necessary decision, which is in the interests of Germany as an aviation hub and of the workforce." Jürgen Kerner, Deputy Chairman of IG Metall, said in a statement.
As well as disputes over control of the next phase of development and access to intellectual property, the two sides had widely differing requirements for the aircraft.
The breakdown over the core fighter echoes France's decision to withdraw from the Eurofighter in the 1980s and follows years of increasingly public bickering between Dassault and Airbus.
"SCAF has been on life support for three years," said UK-based defence analyst Francis Tusa, referring to the project's French acronym.
For his part, Merz has openly questioned whether developing a manned sixth-generation fighter jet still made sense for his country's air force, and said Germany did not need a nuclear-capable jet that could land on an aircraft carrier.
(Additional reporting by Michel Rose; Writing by Ludwig Burger and James Mackenzie; Editing by Thomas Seythal, Andrew Heavens, Alexandra Hudson and Nick Zieminski)
